G Chandrashekhar

Will India’s edible oil import bill rise on El Nino fears?

G Chandrashekhar Mumbai | Updated on November 24, 2017

At a time when there is no unanimity over the timing and intensity of the looming El Nino on the one hand, and prospects of softening edible oil prices overseas (palm oil, soya oil) on the other, Assocham’s latest report that India’s import bill for edible oil will rise sharply in 2014-15 reflects wholly inadequate understanding of the ground realities. In some way, it borders on scaremongering with a potential to unleash speculative tendencies, something that is best avoided.

The report says that India’s edible oil bill will rise by a whopping 50 per cent to $14 billion (₹84,000 crore) during the current fiscal, up sharply from $9.3 billion (₹56,000 crore) last fiscal. This is premised on the expectation that indigenous production of oilseeds would be hit by at least 8-10 per cent due to the predicted deficient monsoon.

How a 10 per cent decline in the quantity of oilseeds production will result in a 50 per cent rise in value of edible oil imports is wholly incomprehensible!

India’s edible oil demand is driven primarily by higher disposable incomes and population growth. In the context of low per capita availability, every increase in income translates to higher demand for food, including edible oil. Current per capita availability of edible oil is some 15 kg.

Two factors need attention: The first is the spatial and temporal distribution of rainfall. Even if the actual quantum of total rainfall during June-September turns out to be less than what is predicted (lower at, say, 90 per cent of the long period average of 89 centimetres) kharif harvest would still be satisfactory provided that precipitation is spread evenly spatially (across the country) and temporally (between June and September at desired intervals).

The second relates to El Nino. Around the world, there is no unanimity among weather forecasters whether El Nino would be mild or severe; and also about the timing. A mild El Nino will have limited impact on crop production. If El Nino strikes in September, much of our kharif crops would have been made by then; but if it strikes in July or August, there is potential for damage.

The adverse effect of a possible El Nino on oil palm production will be felt only next year, that is, in 2015.

Published on June 17, 2014

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